Fig 1: Sanyo Electric Executive Vice President Susumu Furuike

The semiconductor business has been run by Sanyo Semiconductor Co Ltd, Sanyo Electric's wholly-owned subsidiary. Sanyo Electric and ON Semiconductor had a press conference in Tokyo and explained how they came to an agreement.

"Since we became a subsidiary of Panasonic Corp in December 2009, we have been discussing our semiconductor business from the viewpoint of concentration and selection," said Susumu Furuike, executive vice president of Sanyo Electric. "And we judged that it is the best option for both Sanyo Electric and Sanyo Semiconductor to strengthen our analog chip and power semiconductor businesses in ON Semiconductor."

Fig1: From the left: Sanyo Electric Executive Vice President Susumu Furuike, ON Semiconductor President & CEO Keith Jackson and Sanyo Semiconductor President Teruo Tabata

Sanyo Electric is planning to direct its resources to eco-businesses including rechargeable batteries and photovoltaic cells. And that is not necessarily consistent with Sanyo Semiconductor's goals, Furuike said.

To sell its semiconductor business, Sanyo Electric negotiated with several firms including investment funds, he said. As for the reason why it chose ON Semiconductor, Sanyo Semiconductor President Teruo Tabata said, "it was the only company that needed all of our discrete semiconductor, hybrid chip, bipolar chip and system chip businesses."

Asked why Sanyo Electric did not integrate Sanyo Semiconductor into Panasonic's semiconductor sector, Furuike said, "It might generate some synergetic effects. But, in terms of complementary relationship of products and the concentration on power semiconductors, we consider it better to sell our semiconductor business to ON Semiconductor."

According to the contract between Sanyo Electric and ON Semiconductor, the Sanyo Semiconductor brand can be used for the next three years.

The production lines of Sanyo Semiconductor were severely damaged by a massive earthquake that hit Niigata Prefecture in Japan in 2004.

"(After the earthquake,) we had to give up on costly projects (like the development of advanced system chips) even when we had technological resources for them," Tabata said. "It is difficult to keep a semiconductor business unless its sales are soaring. To tell the truth, we had to make agonizing choices (in and after 2004)."

Asked about the necessity of downsizing and restructuring manufacturing bases for selling the semiconductor business, he said, "We consider that we have already completed structural reforms." Sanyo Semiconductor currently has 8,260 employees. Its sales amount was ¥105.4 billion (approx US$1.207 billion) in fiscal 2009.

Sanyo Electric expects that the business integration will generate three synergetic effects. First, because ON Semiconductor and Sanyo Semiconductor have an edge in the European and US markets and the East Asian market, respectively, they can complement each other in terms of sales territories. Keith Jackson, President and CEO of ON Semiconductor, said, "ON Semiconductor will be able to make a full-fledged entry into the Japanese market by acquiring the resources of Sanyo Semiconductor."

Second, because the strengths of ON Semiconductor and Sanyo Semiconductor lie in discrete chips and custom chips, respectively, it will become possible to offer solutions by combining them. Third, the production capacities and manufacturing bases of the two companies can be used so that they will complement each other.